Apple launches new Nano model

Apple Computer has cut the price of its cheapest digital music
player, the iPod Shuffle, and launched a smaller-capacity version
of its mid-priced iPod Nano.

The new 1GB Nano, the sleek iPod model that won rave reviews
from critics and consumers when it was introduced last September,
is priced at $219 in Australia.

The move by Apple, which has 70 per cent of the US digital music
player market, is aimed at further consolidating a market that it
leads, Apple executives said. The company also said it has now sold
12 million videos on its iTunes online store.

"By making it even more affordable, we want to continue to grow
and enlarge the market," said Greg Joswiak, head of iPod product
marketing, in a telephone interview.

In Australia, the price of the 512MB Shuffle has been cut from
$149 to for $99, and the price of the 1GB version has been cut from
$199 to $149.

The 512MB version holds about 120 songs.

The price of the larger capacity Nanos remains unchanged. In
Australia, the 2GB Nano sells for $299 and holds about 500 songs; a
4GB model sells for $359.

Apple has already sold more than 40 million iPods since their
introduction in October 2001, and, in 2005 alone, sold more than 30
million of the popular items.

The price cuts could raise questions about whether Apple's
profit margins will suffer, but American Technology Research
analyst Shaw Wu said he was not concerned.

"The price of components have come down more than 70 percent,
especially flash memory for the Shuffle," he said. "And the price
of the Shuffle hadn't changed, so they were making a ton of profit
off the Shuffle. So they're passing some of those savings on."

Asked whether Apple needed to cut prices for products that were
already so popular, Wu said, "While iPods have a 70 per cent share
in the US, internationally its share is much lower at around 40 per
cent."

While Joswiak declined to comment on the lower prices' impact on
iPod gross margins, he said the announcement was part of Apple's
longer-term strategy. Apple Chief Financial Officer Peter
Oppenheimer has said that average gross margin on all iPod models
is 20 per cent or more.

"It's fair to say this has been a planned move," Joswiak said
when asked about gross margin impact.

Wu also said that recent studies suggest only a third of all US
households have a digital music player, suggesting that the market
opportunity for the iPod is greater than its global market share
suggests.

Apple shares were up US16 cents at $US67.46 in Nasdaq trade
after rising as high as $US69.48 earlier in the session, a gain of
3 per cent. The shares fell nearly 13 per cent over the previous
four intraday trading sessions.

The stock trades at about 25 times its projected earnings per
share before items for its fiscal year 2007 ending in
September.